Akzo Nobel’s Outlook Improves on Cost Cuts, Lower Expenses
Akzo Nobel NV lifted expectations for the year after the paintmaker cut costs with raw material set to fall.
(Bloomberg) -- Akzo Nobel NV lifted expectations for the year after the paintmaker cut costs with raw material prices set to fall.
The owner of the Dulux brand now targets adjusted earnings before interest, tax and amortization of as much as €1.55 billion ($1.7 billion) this year, slightly higher than before, it said Tuesday. Shares were little changed in early trading.
Paint and coating makers are seeing some pressure dissipate as surges in the cost of raw materials have eased. But with the global economy softening, there are still concerns about demand, especially in key architectural and industrial end markets. Akzo Nobel’s second-quarter earnings of €367 million fell short of analyst forecasts.
Demand is expected to remain along the same lines in the second half of the year as volumes are not rising significantly, Akzo Nobel Chief Executive Officer Greg Poux-Guillaume said in an interview with Bloomberg TV. The decline in raw material costs have become a “tailwind” for the firm, he said, adding that supply chains are no longer an issue.
The industry is “running out of reasons to increase pricing,” the CEO said, adding that he doesn’t see significant hikes in the second half of the year.
Volumes were 1% lower, “with trends improving after a weak start to the quarter,” the company said in its earnings statement. The Turkish lira’s devaluation alone dragged down the revenue by €46 million in the quarter.
Pricing was up 5% in the quarter for the paintmaker, but revenue dropped 4% to €2.74 billion. That compared to the €2.85 billion average forecast from analysts in a Bloomberg survey.
(Updates with comments from the CEO beginning in fifth paragraph.)
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